Cost of Litigation

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On Wed, 20 Jun 2007 14:45:32 -0700, "Pounds on Wood"

If cavemen had to deal with lawyers there wouldn't be any more lawyers. In fact it's quite possible that's what first drove man to use a large stick as a club.
-Leuf
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Another factoid.
I was involved as defendant in a law suit where a kid had the end of one finger cut off because he ran into a fire extinguisher cabinet and caught his finger in it. There were 5 defendants, and it was settled on the court house steps. The kid got about $25,000, less probably 1/3 for his lawyers. Each defendant ended up paying about $10,000 in settlement and legal costs.
So, $50,000 had to change hands, so the injured party could get $17,000. Not very efficient, but that's what happens when you can't agree on a settlement.
Old Guy

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EVERYTHING includes the cost of anticipated legal expenses. Call it product liability insurance if you will.
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Take a look at these sites for some entertainment
http://www.mlaw.org/wwl/loonylawsuits.html
http://www.centerjd.org/private/mythbuster/MB_facts_products_liability.htm
http://www.overlawyered.com/product /
I used to have a site bookmarked that gave relative cost of product liability as to cost per product. Darn if I can't find it.
Allen
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wrote:

...
"Court statistics. In typical products liability cases (non-asbestos), injured victims win before juries in only 31 percent of cases. "Tort Trials and Verdicts in Large Counties, 1996," U.S. Department of Justice, Office of Justice Programs, Bureau of Justice Statistics, NCJ-179769 (August 2000)"
31%, huh. Probably means at least 50% should never have been filed.
Tom Veatch Wichita, KS USA
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On Jun 21, 12:04 am, Tom Veatch wrote:

I think you're misreading that, Tom. I believe the operative phrase is "win before juries". Lawyers like to settle (Yay! We both won!).
R
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I can tell you that the maker of my favorite folding ladder pulled out of the US for that very reason
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wrote:

Yes, my thoughts are that your "knowledgeable" people are in error.
Anticipated legal expense is usually expressed in a "Company's" overhead expense as a liability reserve. That reserve changes based on actual occurance and payout.
I will not quote figures, but, as an ex maker of an inherently dangerous product, I would say your figure is far, far, far, overstated.
A company's liability in an accident is based on several factors. 1. Failure to manufacture the product to established safety standards. 2. failure of the product through some flaw in the manufacturing process. 3. Failure to warn the buyer of the inherent danger of the product, and to explain the proper use.
Stupidity that leads to improper use of the product does not constitute a liability for the manufacture, although many settle cases of that nature in order to stay out of court.
But maybe the ladder business is different.
Frank
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Frank Boettcher wrote:

You left out
4. Ability of lawyer to convince simple-minded juries in personal injury/damage suits.
The expense of this until some legislative relief was a major factor (not the only one, but certainly a major contributor) to a period of time not so long ago wherein there were _no_ manufacturers of single-engine prop aircraft in the US. Simply to costly/risky as opposed to the potential market. Happily, that has turned around.
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A few years back there was a segment of 60 Minutes or Dateline about a ladder company going out of business because of lawsuits. I don't recall the details, but the ladders were not defective according to your description, but were modified, damaged, and mis-used, but the lawsuits went on. I can easily believe the 30% figure from what I saw.
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wrote:

Easy enough to prove or disprove. Do you know of a publicly traded company that makes ladders? Look up their annual report and see what the reserve is as a percent of cost of goods sold.
I just went on the Werner bancruptcy site and quickly waded through a bunch of the court documents. In the overview, no mention was made of excessive litigation being a cause of bancruptcy. The loss of a Home Depot contract, the unanticipated increase in the price of aluminum, etc. but no mention of litigation, pending or otherwise. Werner is a private holding company, (recently sold as part of the restructuring required from chapter 11, and remaining private), so they do not have to report their financials publicly, but maybe there are others.
I still disbelieve the 30% figure, but not interested enough to go on with this.
Frank
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Frank wrote:
> I just went on the Werner bancruptcy site and quickly waded through a > bunch of the court documents.
Just for funzies, checked out Bauer Ladder, Wooster, Ohio.
They seem to be doing quite nicely along with their neighbor, The Wooster Brush Company.
Both are still under local ownership as far as I know, and have been around forever or at least it seems that way.
OTOH, RubberMaid, a Wooster institution, got greedy, got in trouble, got sucked up by Newell, who then used an excuse to close them down, go to China, and also building a plant out in the SoCal desert.
BTW, Wayne County, of which Wooster is the county seat, is a VERY rich agricultural community.
Maybe those "Wayne Country Farmers" know something about how to run a business.
Lew
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Lew Hodgett wrote:

Some number of years back, frontline did a piece on wal-mart. They claimed RubberMaid had a price increase due to increases in raw materials. Wal-mart refused to pay the increased prices and by this time Wal-mart was big enough that by not selling to them, RubberMaid was unable to sell enough to stay in business without moving manufacturing overseas to meet the price Wal-mart was willing to pay. Don't know how much truth there is in that.
ron
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r payne wrote:

Well, it's the story but not the whole story... :)
RubberMaid had done a number on themselves by over-committing to the Wal_Mart contract and backed themselves into a corner from which they couldn't recover. There was pressure from W-M but RM was a too willing accomplice out of what initially looked like easy pickings...
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dpb wrote:
> RubberMaid had done a number on themselves by over-committing to the > Wal_Mart contract and backed themselves into a corner from which they > couldn't recover. There was pressure from W-M but RM was a too willing > accomplice out of what initially looked like easy pickings...
As I said, they got greedy.
I once worked for a company that went to the market only thru manufacturers representatives.
The US Gov't, during WWII, wanted to buy direct.
The old man said thank you, but he ONLY did business thru his reps.
This is the same guy that told one of the BIG 3, that he couldn't accept an order that would have doubled the size of the company.
The old man knew how to keep his company in working order.
Lew
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One of the wisest, and smartest, businessmen I've ever known owned a small (relatively) chair making plant. He took over in '59, and retired about seven years ago. In the process, he tripled the size of the employee base (40 years or so), while getting production up more, and not once had a layoff in that period of time. Family owned company. 500 chairs a day was it, quality was superb (he aimed for 0% quality control and came close to achieving it), prices decent to high. Profits were very reasonable for him and his family. When he finally retired, well into his 70s, he had to sell out as no one in his family wanted to company. A big recliner maker bought it, and now all the employees wonder from day to day when the lay-offs will hit. They haven't yet, but it has been very, very close several times.
Probably 85% of the furniture business on which this area used to depend is gone, along with textile manufacturing (about 99.4% gone). Large companies outsource.
My point being, John always refused to deal with Sears or WalMart. Their requirements were too restrictive, prices way too low, and, IMS, he once told me that they wanted to get into your books and make sure your expense allocation for a particular item followed THEIR rules. He refused to play.
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dpb wrote:

And the result? Wal-Mart - and their customers - got a product of similar quality at a lower price. Rubbermaid should get a prize.
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wrote:

My experience shows me that many Wal-Mart products are NOT of similar quality, only cheaply made. This has held true for me even with cheapie BS items ala Rubbermaid kitchen items.
I've lost count of how many times I've purchased simple household items from Wal-Mart that were not suitable for more than a single use, much less a dishwasher trip.
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On Thu, 21 Jun 2007 23:09:48 GMT, Lew Hodgett

I think that's right. I know I only use Wooster and Purdy brushes. Wince at the cash register, but they make finishing a joy (if that's possible); clean them well and they will last indefintely.
You can borrow my Unisaw, but don't ask for my brushes. :~)
Frank
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Frank Boettcher wrote:
> I think that's right. I know I only use Wooster and Purdy brushes. > Wince at the cash register, but they make finishing a joy (if that's > possible); clean them well and they will last indefintely.
Interesting story how The Wooster Brush was founded.
Shortly after the end of the Civil War, the brothers bought a couple of trunks at an unclaimed freight sale.
When they opened them up, they were full of Chinese Hog Bristles.
What to do. Make paint brushes. What else.
Lew
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